The UK government’s Insolvency Service today said it recorded a higher number of insolvencies over the past three months than at any other point in more than a decade, after the numbers of companies declaring voluntary bankruptcies hit their highest levels since records began.
The past three months saw a total of 5,629 English and Welsh compared declare bankruptcy after voluntary bankruptcies – that account for almost nine-in-ten of all insolvencies – soared to their highest levels since records began, data from UK government’s insolvency service shows.
The figures mark a 13 per cent uptick on the previous quarter, and an 81 per cent rise on the previous year, as the total number of insolvencies in England and Wales reached their highest levels since the third quarter of 2009.
The sharp increase in the number of bankruptcies came after the numbers of Creditors’ Voluntary Liquidations (CVLs), which accounted for 87 per cent of all insolvencies, hit record highs.
All in all, the insolvency service recorded 4,908 CVLs over the previous quarter, as company directors opted to fold their companies, in the face of worsening economic conditions and the withdrawal of Covid related government support.
Although the number of bankruptcies increased across all sectors of the economy, insolvencies increased most sharply in the construction, retail, and hospitality industries, the government figures show.
Samantha Keen, a partner at EY Parthenon, explained: “The record levels of CVLs are the first tranche of insolvencies we expected to see involving companies that have struggled to stay viable without the lifeline of government support provided over the pandemic.”
“We expect further insolvencies in the year ahead among larger businesses who are struggling to adapt to challenging trading conditions, tighter capital, and increased market volatility.”
The record figures came as the Insolvency Service also recorded slight upticks in the numbers of compulsory liquidations and other types of insolvencies. However, the numbers of both compulsory liquidations and all other types of insolvency remained below pre-Covid levels.
Looking forwards, analysts forecast a further uptick in the number of insolvencies, as rising living costs, soaring inflation, and global supply chain issues continue to take their toll on companies’ bottom lines.
Christina Fitzgerald, president of insolvency and restructuring sector trade body R3, said: “The current economic headwinds are only likely to get worse before they get better, and this will mean businesses in England and Wales will have a tough second-half of the year.”
The record levels of corporate insolvencies came as the numbers of personal insolvencies fell 10 per cent compared to the previous quarter, from 32,197 in Q1 2022 to 28,946 in Q2 2022.
However, Paul Rouse, a partner at Mazars, said the numbers of personal insolvencies will likely increase sharply in coming months, as soaring inflation and higher interest rates push people into bankruptcy. “At some point the dam will break – it’s only a question of when,” Rouse said.